Debt Repudiation or an Interest Strike?
The problem with debt repudiation is that it is difficult to get the money out of circulation. Our money is credit based and if the debts are not repaid, the money will circulate forever. An interest strike is therefore the better option.
Since the start of the Credit Crunch there has been talk of debt repudiation. The basic idea is that the debt is odious and that since banks just print the money they engage in a fraudulent contract.
This is only partly true. Consider this:
If someone gets a mortgage to buy a house, would it be fair to repudiate that debt?
This person would obtain his house for free. At whose cost? Not the bank’s. They just write off the debt, go bust and get a bailout.
What banks do is capitalize the credit of the population. It is not their credit, it is ours. If somebody goes into debt with a bank and the bank creates the money for the loan, it is really society that is allowing the individual to ‘buy now, and pay later’.
In the case of the mortgage, let’s say it is a typical $100k mortgage, the debtor buys the house and then repudiates the debt. The bank writes it off, but the $100k that was created for the loan will continue to circulate. Somebody was payed with that money and we cannot just disown him.
As a result, we cannot create new credit without inflating the money supply. This is the basic problem: how are we going to get the money out of circulation? It can only be done by taxation, but that’s a form of disowning too. Not everybody would share equally (or better: equitably) in the burden either.
If we now repudiate the debt, we would have trillions all over the place that would never be payed back. To create new credit on top of that would be inflationary and probably result in rising prices. People who are not indebted would share in the burden without benefiting from the repudiation.
an Interest Strike
The problem is not debt, it’s interest. The debtor actually bought real stuff with the money he borrowed. He didn’t really borrow it from the bank, but was allowed to pay later by the community. That is the nature of credit. What we have is loan sharks usurping the credit of the population. They plunder the debtor with interest. In the case of the mortgage ($150k interest for a $100k loan over 30 years) it shows how much money we are talking about. The National debt is another case in point. At 4% the National Debt is payed in interest every 25 years, without even denting the principal itself.
That’s why it’s better to go for an interest strike. Interest is the tool of plunder, not the credit.
People no longer burdened with interest will be able to pay off the loan easily. Even Greece would be able to pay off their entire National Debt within twenty years by using the debt service they pay now to pay off the debt itself.
By paying off the debt, the money goes out of circulation. So it can be loaned back into existence again for new ventures.
The debtor pays back what he actually borrowed, which is much more fair to those who were not indebted and would not benefit from debt repudiation and would actually pay in terms of inflation.
Banks prefer debt repudiation
Why? Because they will go broke and will be compensated with ‘recapitalization’.
If we go for an interest strike, their solvency would remain intact. But they would stop being profitable. The loan shark would see its income stream dry up. Rothschild would have to content himself with a mere $500 Trillion net asset position.
Interest is the basic business model of the banks. They don’t want that touched.
An interest strike is the better solution. Debtors must repay, they gained when going into debt. What is wrong is plundering them with usury.
A debt repudiation would leave trillions of dollars (and euros) that would never be payed back. New credit can only be created at the cost of inflation.
An interest strike goes at the heart of the matter.
For a full program for an interest strike see:
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